Author: Dr Jason Ketter

The highly anticipated 2018 Giving USA Report for the 2017 year has just been released. It reports a record $410.02 billion in contributions, representing a 5.2% increase from last year (3% increase, adjusted for inflation). Giving USA: The Annual Report on Philanthropy, is the longest running and most comprehensive report on philanthropy in the USA. The report is presented by two organisations: the fundraising professionals at Giving USA Foundation, a public service initiative of The Giving Institute (AskRIGHT is a member of The Giving Institute); and the research team at The Indiana University Lilly Family Foundation of Philanthropy.

Some of the key questions:

Where did the money come from?

Who received the money?

Why is giving to religion up and giving to international affairs down?

Are people giving more?

What is the impact of the stock market rally?

What are the lessons from the rise in online giving?

WHERE DID THE MONEY COME FROM?

Overall, giving has risen: individual giving is up 5.2%, foundation giving by 6%, bequests giving by 2.3%, and corporation giving by 8%. The percentage breakdown from each source held steady from last year; however, a changing financial landscape may affect foundations and bequests as the transfer of wealth continues in the USA.

The increase in the number of foundations and donor advised funds is expected to continue (the Australian equivalent of the USA Donor Advised Funds are Private Ancillary Funds, which also continue to increase in quantity and assets). More donors, it seems, are committing to giving to those causes they are passionate about, but some do so by establishing criteria to be adhered to after their death.

The growth in foundation giving is attributed to the high performing USA stock market (S&P 500 experienced a 19.4% growth in 2017) and several mega-gifts ($300 million or more). A couple of outliers were Mark Zuckerberg and his partner, Priscilla Chan, who gave $1.9 billion to the Chan Zuckerberg Foundation, and Michael and Susan Dell, who put $1 billion in the Michael and Susan Dell Foundation.

Along with foundations, bequests are another area that will see an increase in the coming years. Currently, and at an increasingly rapid pace, more than $12 trillion in assets in the USA are being shifted from those born in the late 1920s, 1930s, and 1940s to their children and grandchildren (the latest USA census data reports 29 million people are over the age of 70). Over the next 30 to 40 years, an additional $30 trillion in assets will pass from the Boomers. It is projected that at the peak, between 2031 and 2045, 10% of the total wealth in the U.S. will be changing hands every five years.

With Millennials expected to be the recipients of this wealth transfer, it is worth noting the difference in giving behaviours of Millennials (born 1981-2000) and Baby Boomers (born 1946-1964). Millennials are either in the early stages of their career or still in school, while the Baby Boomers are retired or fast approaching retirement. In the most recent Fidelity Charitable report, The Future of Philanthropy, a survey of 3,200 donors revealed that 56% of Millennials report spontaneous giving (see section below on trends in online giving) and 72% of Baby Boomers say their giving is more planned. Further, Millennials’ worldview is distinct from Baby Boomers: the approach of Millennials to philanthropy is more global and social, and they express more optimism about philanthropy’s ability to impact the issues most important to them. The transfer of wealth that is projected in the Giving USA report will keep the bequest pipeline healthy.

It is worth noting the breakdown of the $35.7 billion in bequests in 2017:

$18.58 billion came from estates with assets $5 million or more

$6.92 billion came from estates with assets between $1 and $5 million

$10.19 billion came from estates with assets below $1 million.

Organisations should not underestimate the impact that non-mega bequests could have. Consider receiving just 1% to 3% of the total value of an estate from each of your many loyal constituents.

WHO RECEIVED THE MONEY?

Contributions to recipient organisations saw religion, receiving 31%, again outpacing all others. Education was second at 14% and human services third at 12%:

Most sectors experienced an increase in gifts:

WHAT ARE THE FUTURE BENEFITS OF TODAY’S GIFTS TO FOUNDATIONS?

The increase in giving to foundations — now 15.5%, up from 3.3% in 2015-2016 — should have a flow-on effect in future years for the other categories when these foundations make grants to support their respective causes. In the USA, most foundations are required by law to give a set percentage (5% is the general rule but the calculation can be complex).

WHY AN INCREASE IN GIVING TO RELIGION?

Some religions preach tithes — literally a tenth of earnings to be given to support their religion and the worthy causes: for example, feeding the poor may account for why religious organisations benefit more from other sources as well as the fact they ask more often, such as weekly. Many religious organisations have also adapted effectively to regular bank transfers of donations.

WHY A DECREASE IN GIVING TO INTERNATIONAL AFFAIRS?

The United States and its neighbours has recently experienced several major natural disasters — including Hurricane Harvey (inflicting $125 billion in damage), Hurricane Imma, and Hurricane Maria — which is attributed to the decline in giving for International Affairs. This follows historical trends in which international affairs experiences a decline in giving following an increased in natural disasters at home. However, the decrease in internal affairs might also be a reflection of the political climate in the US, with the sentiment of “American First” and “Make American Great Again.” This is something to watch.

WHY A DECREASE IN GIVING TO INDIVIDUALS?

This area is known to vary. The vast majority of giving to individuals comprises medicines for patients in need, made possible by patient assistance programs of pharmaceutical companies’ operating foundations. These programs continually change under the various schemes run by the companies.

ARE PEOPLE GIVING MORE?

Giving as a percentage of disposable income remains steady at 2%. To put this into perspective, according to the US Bureau of Labour Statistics Americans spend 5% of their disposable personal income on entertainment. The graph below illustrates the trend over the last forty years.

WHAT IS THE IMPACT OF THE STOCK MARKET RALLY?

2017 giving in the USA is charted against the stock market’s Standard and Poors 500 Index (S&P 500 is the market capitalisation weight index of the 500 largest publicly traded USA companies by market value). The performance of the stock market might affect giving — certainly there is a significant correlation, although there is a lag between the two. 2017 was a banner year for the stock market, indicating 2018 could be a good year for philanthropic giving.

Finally, the total giving as a percentage of the Gross Domestic Product has been hovering around 2% for the last few years.

WHAT ARE THE LESSONS FROM THE RISE IN ONLINE GIVING?

The report included statistics from the Blackbaud’s Index (Blackbaud has a fundraising software platform servicing the non-profit industry). The online giving data reported from 5,764 non-profits that charitable support secured online amounted to $3.2 billion in 2017:

Online giving to religious organisations grew in 2017 and outpaced growth in giving through traditional methods.

Shopping habits of the consumer continue to evolve with the rise of internet shopping, as smartphones become easier to use, enabling consumers to quickly make bookings, purchases and appointments.

There are some lessons for non-profits. As the online experience for these commercial sectors continues to improve, charities must also move to create similar online experiences. Unfortunately, online giving is marked by impatience, especially for the first gift to an organisation, so an antiquated online experience may lead a potential donor to give up the attempt. Organisations would benefit from an evaluation of their online experience for current and future supporters.

WHAT IS “RAGE PHILANTHROPY” AND WHERE IS IT HEADED?

Rage philanthropy — the recent trend of activism-motivated giving inspired by the election of President Donald Trump — is waning, but it was made conveniently possible through online giving (directly to an organisation or to crowdfunding sites) and lessons are to be learned. Such activism brought a number of first-time donors to organisations, which created the need to rethink stewardship and donor relations to retain these particular donors. Today’s active donors want more than a thank you letter. They need the opportunity to be involved with the organisation.

WHAT NEXT?

We can learn from the trends taking place in the USA to help our philanthropic efforts here in Australia. Of course, non-profits are at the mercy of the economy, like everyone else, but organisations can be proactive in developing online platforms that are modelled after successful private sector businesses and that target potential donors based on demographic trends—the treatment of the Millennials compared to the Baby Boomers, incorporating online giving in your major gift program, and understanding and executing a comprehensive bequest program to raise the awareness among donors on how they can make a difference in the future.

At the Alliance of Girls’ Schools Australasia Conference in Adelaide — Fearless Girls. Strong Women. — I was struck by the growing culture of Youth Philanthropy that is developing in many girls’ schools. These girls are learning valuable philanthropic lessons through these programs: social awareness, leadership skills, civic engagement, team working skills, service learning, empathy, assessment tools, and the spirit and meaning of philanthropy. Many of these philanthropists, either today or in the future, won’t be in the headlines for making large multi-million gifts; however, by actively working to make their communities better and helping those who need help, they will become the next generation of strong, compassionate women.

Each school is unique, abiding by its own independent philosophy and mission. As a result, each social justice program (SJP) is varied, supported as they are by students, volunteers, teachers, and administrators. There is nevertheless a common theme: a growing number of schools are making a huge sacrifice by using the energy and limited resources to benefit others, not themselves.

This sacrifice is selfless and generous, but in some cases it isn’t necessarily the best way forward. Philanthropists are keen to support organisations making a difference in the lives of those they serve as well as the lives that these individuals touch in such a positive and helpful way. A good warm-hearted story goes a long way in motivating a philanthropist to make a gift. What better story than one of Youth Philanthropy and the impact these fearless girls are having on the lives of others?

If you aim to make a commitment to care for someone, then it is critically important that you first take care of yourself. The Alliance members are doing wonderful work in educating girls, but there is a need to look to the future and the role philanthropy can play. In many cases, a potential donor does not contribute to a worthy cause because they weren’t asked. Unfortunately, some of the schools are not asking for themselves and they need to start. A more overt focus by school leadership on philanthropy is a significant opportunity for any school to do more for others and do more for itself, because both pursuits ultimately benefit girls.

How does a school allocate the finances to invest in the personnel and tools needed to commence a sustainable, and beneficial, fundraising program given the pressures on the budget?

The answer is that the school leadership (board and executive) must find the will to act. Fundraising is a team sport. It can’t just be left to the fundraiser as the fundraiser needs the involvement of the board volunteers, the principals and deputy principals, the teachers, and other staff to promote and share the case for support. Further, fundraising is a profession and takes a dedicated budget that supports the professional(s) who are implementing a fundraising plan, putting a great deal of time into running fundraising activities and cultivating (along with others) high quality relationships.

A necessary fundamental tool to raise funds is a dedicated constituent relationship management (CRM) software system for fundraising. Fundraising is about relationships and without a fit-for-purpose CRM designed to support building lasting relationships, i.e. institutional relationships that continue from one principal to the next, the aspirational goals of raising significant dollars will be very difficult to realise. Over 60% of the schools reported not having a CRM to support their fundraising activities, i.e. activities raising monies for the benefit of their school, and yet the 2018 Fundraising and Alumnae Relations Alliance Survey clearly showed that schools that had invested in a CRM were achieving better results.

Schools must allocate staff time to work with the girls and volunteers to ensure that such activities are well-organised, are following the law (e.g. raffles), and are promoting the school appropriately along with the other good causes they have chosen to support. In addition to time, schools must find the will to set out the fundraising work as a strategic and operational priority and allocate sufficient human, marketing, and operational resources in the annual budget. Asking for a gift to benefit the school directly doesn’t have to been done at the expense the SJP. Quite the opposite.

A quick search using the key words “organization” and “culture” together on Amazon.com books returns over 8,000 results. That is a significant amount of opinions, studies, and explanations on the subject. Some of these books are seeking the holy grail of the best organizational culture and advocating that all organizations should strive to achieve a particular culture. Is there a “best” organizational culture? No. The desired culture of an organization can very dependent on the mission of the organization and not all missions are the same. The culture of a creative ad agency, for example, may not work so well for a military squad steeped in battle.

Nonprofits relying on fundraising to help advance an overarching mission benefit from the instillation of a culture of philanthropy. Fundraising is a team sport. The culture of philanthropy within a nonprofit demonstrates a universal understanding, at all levels of the organization, of the connection between donors and their philanthropic investment. Further, there is staff willingness, regardless of title or job description, to participate in the process to secure and steward this investment though a shared understanding and respect for the donor giving cycle. To often the fundraising department is viewed by others that asking for money, stewarding a gift, or promoting gifting opportunities lies only with the advancement team and it’s their job alone to bring in gifts from individuals, companies, trusts or foundations.

It is the job of a fundraiser to secure gifts, but the attitude that it should only be left to the fundraiser is short-changing the organization. Should the players on a premiere sports team (select your preferred sport) work in isolation of the trainers, conditioning coaches, facilities personnel, the head coach? It is hard to fathom how athletes who take to the field without general support, without a game plan advocated and instructed by a coach, or without interaction with other members of the organization could become a premiere sports team.

Within a non-profit organization’s overarching culture, the desired culture of philanthropy needs to be developed. Schein defines culture as “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as they correct way to perceive, think, and feel in relation to those problems.”[1]

Culture is deeper than the climate of an organization. Denison articulates the difference: “Climate refers to a situation and its link to thoughts, feelings, and behaviors of organizational members. Thus, it is temporal, subjective, and often subject to direct manipulation by people with power and influence. Culture, in contrast, refers to an evolved contest (within which a situation may be embedded).” [2] To be recognized as having a culture of philanthropy it must be embedded throughout the organization.

Sustaining this culture requires the embracement, and enhancement, by each new leader of the organization. Successful fundraising builds on itself as demonstrated by a plethora of organizations upon celebrating a successful campaign begin working on the next one. Although campaigns may have set shorter time frames, fundraising is ongoing and requires a vision looking beyond the horizon.

Having leadership connect the philanthropic dots for members of the organization is a critical component, along with leadership practicing what he/she preaches. Unfortunately, for some in an organization fundraising is a “dirty” word. Further, an individual not involved daily in fundraising may view a potential donor as a multi-millionaire so they should have no problem giving the organization (or a special project within the organization) $500K or $1M—after all they are multi-millionaires. This is not a culture of philanthropy as it lacks an understanding and respect for the donor giving cycle. The donor giving cycle works towards proposal alignment followed by an appropriate solicitation and sustainable stewardship. It is the right project, the right timing, the right amount with the right person asking.

The fundraiser must be able to articulate the mission along with the successes and remaining challenges to a potential donor. Typically, the fundraiser is not in the trenches delivery the services of the nonprofit to the end user. This is an important factor and why creating a culture of philanthropy is critical to creating a high performing and sustainable fundraising program. The success of a particular fundraiser, or fundraising campaign, requires collaboration among fundraisers, along with the entire team in the fundraising portfolio, and the organization’s entire team.

Depending on the “maturity” of the fundraising and engagement program within an organization, the time to achieve a culture of philanthropy can vary. What does the organizational structure look like? Where does the office(s) of relations and fundraising sit on the organizational chart? Does the director (or organizational title used) report directly to the CEO/President of the organization? Is the position limited to the areas of relations and fundraising or is the position combined with communications, marketing, or another area that indirectly may help the fundraising unit, but takes time away from the core business of the relations and fundraising unit?

Budgeting. When it comes to developing the organization’s budget is the fundraising KPI equal to the projected shortfall in the budget, i.e. fundraising needs to fill the gap. Or are the KPIs for fundraising more measured? Is there a director of fundraising in the room when the overall organization’s budget is developed?

Strategic plan. When the organization’s strategic plan is developed how is fundraising and external engagement included? It is part of the discussion at the highest level of the organization? Does the strategic plan incorporate the fundraising and engagement component?

The culture of philanthropy within an organization may develop organically over time, however, the opportunity cost while this is happening could be significant. Rather, it is worth exploring implementing an education and involvement program to speed up the process to help members of the team connect the important work they do to fundraising success. Everyone at the organization should be included—after all, it is a team sport.